Home Loan Deposit
A home loan deposit is your cash contribution towards owning your new home. The size of your home loan deposit decides how much you borrow for a home loan.
How Much Needs To Be Saved?
This normally depends on the purchase price of the home you want to buy. You could buy a first home with as low as a 5% deposit but this will mean you will be required to pay Lenders Mortgage Insurance.
Lenders Mortgage insurance can be avoided by saving 20% of the loan amount, or using a strategy such as a Family Guarantee, which is when a family member, such as your parents, put up the equity in their home to cover your deposit costs.
You should first determine your borrowing power, and set savings targets if you are planning to go ahead with buying a home.
To find out your borrowing power, you can start by using a simple borrowing calculator. Our saving target calculator can work out your saving ability so you can start saving with a purpose .
What counts toward your Deposit?
You need to demonstrate what lenders call ‘genuine saving’. Genuine savings are a minimum of 3 months of actual savings being deposited and kept in a bank account. Cash gifts, or lump sum deposits, for example, are generally not considered genuine savings. Some lenders may expect you to have 5% of the loan amount as genuine savings.
Genuine Savings counts for:
1. Consistent Payment Proof
You may be able to use your rental payment history as genuine proof of saving. You must be paying rent while applying for the loan, have a lease through a registered property manager or real estate agent, and the rent must be for the same property t for 12 months.
2. Gifts of money
Gift of money can be used with the help of your parents or family to boost your deposit. This money is must be a gift from and stated that it does not needs be repaid. For it to considered genuine savings you must keep the money in a savings account for 3 months.
3. Shares, Investment or Equity in Other Property
Some other things that may count as Genuine Saving also includes
- Term Deposits held for three months
- Shares held for at least three months
- Equity in an existing property